Borrowing to invest
Superannuation law now allows a SMSF Trustee to borrow where it wants to acquire an asset. Importantly the borrowing possibilities are wide, the rules broad and with a good asset base in a SMSF the opportunities for leverage is significant.
There are a number of benefits for a SMSF using leverage in the fund. Of course great care must be had to what happens in the event of a loss in value of any asset acquired under a borrowing arrangement. And as we are talking about a SMSF it is absolutely crucial to get the paperwork and documentation right the first time. If a mistake is made it can result in serious financial penalties for the Trustee of the fund and potential financial consequences for fund members.